Question : The concept of consumer equilibrium refers to a situation where:
Option 1: The consumer is maximizing total utility.
Option 2: The consumer is maximizing marginal utility.
Option 3: The consumer is consuming goods in equal proportions.
Option 4: The consumer is consuming goods within the budget constraint.
Correct Answer: The consumer is maximizing marginal utility.
Solution : The correct answer is (a) The consumer is maximizing total utility.
The concept of consumer equilibrium refers to a situation where the consumer has achieved the highest level of satisfaction or utility given their budget constraint and the prices of goods. In this state, the consumer has allocated their income in a way that maximizes their total utility.
While the consumer may also consider marginal utility when making consumption decisions, the focus of consumer equilibrium is on maximizing the overall or total utility derived from the combination of goods and services consumed.
Therefore, the consumer is maximizing total utility in a state of consumer equilibrium.
Option 2: The consumer is maximizing marginal utilitv.
Question : In the cardinal utility approach, consumer's equilibrium is achieved when:
Option 1: Total utility is maximized.
Option 2: Marginal utility is maximized.
Option 3: Marginal utility equals zero.
Option 4: Marginal utility per dollar spent is equal across all goods.
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